"To Enhance Competitiveness of Korean Stock Market, It Must Be Included in Overseas Advanced Country Indices"

Foreign Investors' Net Purchase Inflow of 60 Trillion Won Possible
South Korean Stock Market Actually Undervalued... Growth Potential↑

[Asia Economy Reporter Minwoo Lee] There has been a claim that in order to enhance the competitiveness of South Korea's stock market, it should be included in major advanced country indices overseas. The reason is that this can secure a long-term and stable foreign buying base, thereby reducing volatility.

On the 15th, Lee Hyoseop, head of the Financial Industry Division at the Korea Capital Market Institute, appeared as a keynote speaker at the discussion forum titled "Breaking the KOSPI Record High: Present and Future," jointly hosted by the Korea Exchange and the Korea Financial Investment Association. He stated, "Inclusion in the Morgan Stanley Capital International (MSCI) advanced country index can secure a long-term and stable foreign buying base," and emphasized, "It is necessary to consider the establishment of an offshore won trading market in the mid to long term to be included in the advanced country index." He analyzed that while the net outflow would be about 140 trillion won if removed from the emerging market index, inclusion in the advanced country index would result in a net inflow of about 200 trillion won, generating approximately 60 trillion won of stable foreign net purchases.

So far, MSCI has not included South Korea's stock market in the advanced country index due to reasons such as the absence of an offshore won trading market that allows 24-hour currency exchange.

Meanwhile, he also argued for the need to expand the investment proportion of pension funds in risky assets such as stocks. Lee said, "Given the high likelihood of a prolonged global ultra-low interest rate environment, efforts to increase expected returns by expanding risky assets are necessary," and emphasized, "It is necessary to consider revising pension fund benchmarks in the direction of increasing investments related to Environment, Social, and Governance (ESG) and the proportion of risky assets."

Regarding short selling, he viewed that speed adjustment is necessary. He evaluated, "Since the measure was implemented on March 16, the KOSPI has quickly regained stability," and added, "As the ban on short selling is set to end in March next year, speed adjustment is needed."

Following this, Kim Hakgyun, head of the Research Center at Shin Young Securities, gave a presentation titled "2020 Securities Market Evaluation and Future Outlook," emphasizing that the domestic stock market is rather undervalued. Kim said, "The rise in stock market valuation is a phenomenon occurring across global stock markets, and South Korea's stock market is rather undervalued," and predicted, "Considering the strength of earnings improvement and manufacturing competitiveness, South Korea's stock market will continue to perform well compared to the global average."

This content was produced with the assistance of AI translation services.